Interim govt leaves FY26 budget revision, next budget projection for political govt

Highlights

• Inflation target raised from 6.5% to 7% for FY26
• GDP growth cut from 5.5% to 5%
• Preliminary goals for FY27 set at 6% inflation and 6% GDP growth for next govt
• ADP trimmed by Tk15,000cr to Tk7.75 lakh crore

The interim government has decided not to revise the current fiscal year's budget in December as previously planned, leaving the task to the next elected government that is expected to take office after the national election scheduled for February.

The move is aimed at allowing the upcoming political government to amend the FY2025-26 budget in line with its own political priorities. Similarly, the interim administration will also not initiate work on the FY2026-27 budget projection, leaving that responsibility entirely to the next government.

The decision came at a meeting of the government's Coordination Council on Fiscal, Monetary, and Exchange Rate Policies, held yesterday with Finance Adviser Dr Salehuddin Ahmed in the chair. This was the council's first meeting for FY2025-26.

The virtual meeting was attended by Commerce Adviser SK Bashir Uddin, Planning Adviser Wahiduddin Mahmud, Bangladesh Bank Governor Ahsan H Mansur, and senior officials from relevant ministries and divisions.

Several officials who attended the Coordination Council meeting told The Business Standard that the interim government expects the newly elected administration to assume office by mid-February, leaving around four and a half months of the current fiscal year.

They said revising the budget now could create inconsistencies with the priorities and objectives of the next government. Once revised, the incoming government would not have the scope to make another revision. Therefore, the current government decided not to revise the ongoing fiscal year's budget.

The officials further said while reviewing the country's economic condition, policymakers expressed satisfaction over the overall economic stability, however, they observed that bringing down inflation to around 7% during this period would have been more comforting for the economy.

The current inflation rate remains above 8%, according to the Bangladesh Bureau of Statistics.

The first meeting of the council, usually held in November each year, reviews various economic indicators – including revenue collection, ADP implementation, export and remittance inflows, foreign exchange reserves, imports, and investment trends.

The finance ministry also presents an outline for revising the current year's budget and a preliminary projection for the next fiscal year's budget to the council for approval.

Finance Division sources noted that the government typically begins revising the budget and preparing the next fiscal year's projection in December, with revisions finalised by January.

Following the government and Election Commission's announcement to hold the national election in February, Finance Adviser Dr Salehuddin Ahmed had told The Business Standard last month that the revised budget for the current fiscal year would be finalised in December.

At that time, he said the interim government would proceed with implementing the new pay scale for government employees, and the necessary additional funds for salaries and allowances would be arranged through the budget revision.

However, after a meeting of the Cabinet Committee on Public Purchase on Sunday, Salehuddin said the decision on the new pay structure would be made by the next elected government, not the current interim one.

Revised targets

Meanwhile, although no decision was made to finalise a revised budget, the council agreed to update the inflation and GDP growth forecasts.

The FY2025-26 budget had set the inflation target at 6.5%, but policymakers have acknowledged that this is now unattainable. The revised estimate will be raised to 7%.

Similarly, the GDP growth target has been revised down from 5.5% to 5%, reflecting the government's recognition that the desired investment levels are not being achieved. Moreover, international lenders, including the IMF, World Bank, and ADB, have all projected lower growth for Bangladesh this year.

For the next fiscal year, however, the finance ministry plans to set preliminary projections at 6% inflation and 6% GDP growth for the incoming government's consideration.

ADP cut, weak implementation

According to Finance Division officials, the advisers expressed concern over sluggish implementation of the Annual Development Programme (ADP) and declining investment and employment trends.

However, they discussed the need to strengthen revenue collection to accelerate ADP implementation without widening the budget deficit.

The government is also less interested in speeding up ADP execution.

Officials said the IMF's lending ceiling, as well as the delay in receiving the December loan tranche, have limited the government's scope to accelerate ADP execution. Political uncertainty ahead of the February election is also expected to keep implementation slow in the coming months – a situation one official described as "a blessing in disguise" for the interim administration.

The council decided to cut Tk15,000 crore from the ADP, reducing the total revised budget size to Tk7.75 lakh crore, down from the original Tk7.90 lakh crore for FY2025-26.